QUESTION 1 [10 MARKS] The goal of corporate governance is to safeguard the interests of shareholders and stakeholders while ensuring the long-term viability of enterprises. The agency theory and the agency problem that results from it are at the forefront of the theories that help to shape corporate governance. The agency theory primarily focuses on the distinction between the interests of the company's shareholders (principals) and the board of directors (agents). The Chief Executive Officer (CEO) who is chosen by the board of directors, and senior management of the business could find themselves in a similar circumstance. In this situation, top managers chosen by the board of directors serve as both the principals and the agents. The agency hypothesis contends that because the principals and the agents have different interests, this causes the agents to take actions that are at odds with the principals' objectives. In businesses, this condition leads to agency issues. The agency problem, which results from conflicts of interest between the principal and the agent, can have a variety of causes. REQUIRED Identify and describe any five (5) reasons for the agency problem MARKS 10

QUESTION 1 [10 MARKS] The goal of corporate governance is to safeguard the interests of shareholders and stakeholders while ensuring the long-term viability of enterprises. The agency theory and the agency problem that results from it are at the forefront of the theories that help to shape corporate governance. The agency theory primarily focuses on the distinction between the interests of the company's shareholders (principals) and the board of directors (agents). The Chief Executive Officer (CEO) who is chosen by the board of directors, and senior management of the business could find themselves in a similar circumstance. In this situation, top managers chosen by the board of directors serve as both the principals and the agents. The agency hypothesis contends that because the principals and the agents have different interests, this causes the agents to take actions that are at odds with the principals' objectives. In businesses, this condition leads to agency issues. The agency problem, which results from conflicts of interest between